Taipei, Taiwan - Taiwan's economic growth rate could decrease by as much as 1.61 percentage points due to potential tariffs imposed by the United States, Council for National Development (NDC) Minister Paul Liu (劉鏡清) stated on Wednesday, citing preliminary analysis.

During a Legislative Yuan meeting, Minister Liu explained that initial analysis indicated Taiwan's gross domestic product (GDP) growth rate could fall between 0.43 and 1.61 percentage points following the US announcement of a possible 32% "reciprocal tariff."

Given Taiwan's high dependence on foreign trade, the Taiwanese economy would be significantly affected by such tariff increases, Minister Liu emphasized. He added that the NDC had commissioned experts to assess the potential impact, and a secondary review is currently underway by other research institutions.

Previously, the Directorate General of Budget, Accounting and Statistics under the Executive Yuan had projected Taiwan's GDP growth rate for 2025 at 3.14%. However, Minister Liu warned that in the worst-case scenario, the growth rate could drop to 1.53%.

Meanwhile, a Bloomberg News report suggested that model projections indicate a 32% US tariff on Taiwanese goods could reduce Taiwan's exports to the US by approximately 63%, potentially leading to a 3.8% contraction in GDP.   

Background on US "Reciprocal Tariff" Measures: The United States has recently mentioned the possibility of imposing "reciprocal tariffs" with the aim of protecting its domestic industries and addressing trade imbalances with certain countries. This measure involves levying tariffs on a country's products at a level corresponding to the tariffs that the same country imposes on US goods.   

Taiwan Economy's Dependence on Foreign Trade: Taiwan has an export-oriented economic structure centered on advanced industries such as semiconductors and electronic components. As the United States is one of Taiwan's major export markets, changes in US tariff policies can directly impact the Taiwanese economy.   

Complexity of Impact Analysis: Analyzing the economic impact of tariff imposition is challenging as it involves considering not only short-term export declines but also long-term investment and industrial structural changes, as well as the reshaping of global supply chains. The significant difference between the NDC's preliminary analysis and Bloomberg News' model projections reflects this complexity.

Taiwan Government's Response: The Taiwanese government has expressed concern about the possibility of US tariff imposition and is reportedly exploring various countermeasures. These may include efforts to minimize tariffs through negotiations with the US, as well as diversifying export markets and strengthening domestic industrial competitiveness.   

The potential imposition of high tariffs by the United States could significantly impact the Taiwanese economy, with varying degrees of decline in economic growth projected across different analyses. The Taiwanese government will likely need to conduct a thorough analysis of this threat and work towards developing proactive response strategies.

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